GBP-EUR tug of war continues

7 February, 2013

Matthew Boyle

Yesterday saw a continuation of the recent quite strange events as the Euro continued on its path of making slow gains against the pound, as has been the case for some time now. Despite overall poor PMI and retail data in Europe, the pound continued to lose ground in a market where sentiment at present seems largely sterling negative. Whilst it seems the battle for recovery wages on (or at least the ability to demonstrate it) in the northern hemisphere, down under saw Australia hold interest rates giving momentum to the strengthening AUD, further bolstered today by news of bullish (positive) employment and unemployment figures. This news will be hugely welcomed by the Aussies as their dollar continues to strengthen against the many other flagging currencies in particular the Pound, Euro and US Dollar.

Last week we saw market data dominated heavily by the US, however this week sees the UK and Europe thrust back into the spotlight. Today sees the BoE release asset purchase data (predicted to be unchanged) but perhaps more interestingly we will see the UK and Europe go “head to head” as both make interest rate announcements. But with both rates forecast to be held, will we see another day of the Euro exerting its current dominance over the pound with further gains? With a worrying triple dip recession on the horizon, and news today from independent body OECD that the UK may now further financial stimulus are we now hoping simply that our news isn’t as bad as Europe’s?

In this current climate what is perhaps of more importance to is the ECB monetary policy statement due later today. There is no doubt the Euro at present is beating the pound but this report will give insight and an indication as to the extent and timeframe of true Euro zone recovery. It is this statement perhaps rather than any overly bullish interest rate decision that could (if negative) swing market confidence back toward the UK.

If you have any upcoming transfers, make sure you speak to your Currency Index broker – in what seems like an ongoing battle, make sure you are well informed and well armed to stay ahead of the markets.